Get ideas on paying for health care

Published in USAA 

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For millions of boomers who retire early, one of the biggest obstacles is figuring out how to pay for health insurance until 65 — the magic age when Medicare kicks in.

Little wonder that a recent AARP survey showed that more than one in five Americans age 45 to 64 reported not being confident that they could afford medical care in 2009. "Boomers are at a high risk of being uninsured, and they're particularly worried," says AARP senior vice president Cheryl Matheis. "They're concerned about losing their job-based coverage or not keeping up with the high premiums of individual coverage."

If you retire before 65, here are your options:

• Former employer's health insurance. Count your lucky stars if this is a choice. Most workers don't receive health insurance from an ex-employer. Last year, only a third of large employers offered retiree health insurance, down from 66% in 1988, according to a survey by the Kaiser Family Foundation and Health Research & Educational Trust. Only 4% of employers with fewer than 200 employees offered retiree health insurance last year. Some companies let retired workers buy health insurance through the company plan. They might even subsidize a portion of the premiums. If not, you'll still benefit from the lower group rates.
  
  Even if you have a pledge from your former employer to provide health coverage, don't depend on it. Most companies maintain the right to change or revoke the coverage at any time.
• Coverage through a spouse's employer plan. If you're married, the next best option is to join your spouse's group plan. Your spouse will pay a higher premium for family coverage, but it will still be cheaper and offer better coverage than an individual policy from an insurer. In 2008, the average employees' contribution for family health coverage was $279.50 a month, according to the Kaiser/HRET Employer Health Benefits Survey. Some plans won't let participants add a relative until open enrollment season, typically in November or December, unless there is a qualifying event, such as marriage or divorce or adoption of a child. If you don't have such a qualifying event, try to postpone your retirement until your spouse can add you to the plan.
• COBRA coverage. Under the Consolidated Omnibus Budget Reconciliation Act, employers are required by federal law to offer COBRA carry-over health coverage for up to 18 months for you and your dependents when you leave your job.
  
  "The advantage is you get group rates and don't have to worry about preexisting conditions being covered," says Paul Fronstin, director of the health research and education program for the Employee Benefit Research Institute. "The disadvantage is that it's expensive and premiums are paid on an after-tax basis." The entire cost of the insurance comes out of your own pocket, plus a 2% administrative fee. And if your ex-employer goes out of business, COBRA coverage is not available.
• Join a professional organization. Some professional or alumni associations offer health insurance with group coverage rates.
• Buy your own policy. Individual policies for adults over 60 can usually be expensive due to the prevalent nature of needing health care at this age. Anticipate a deductible of $1,000, $2,500 or even $5,000 in order to keep the premium within budget. Premiums vary widely based on your age and health.
  
  You might seek out a policy that works in conjunction with a health savings account, which may provide some tax benefits when you need to pay for out-of-pocket medical expenses.
  
  Be forewarned: The greatest challenge to obtaining coverage may not be your budget, but your health. You may be denied coverage or turned down completely if you have ailments typical for your age. But note that you could be protected from such consequences under the Health Insurance Portability and Insurance Act of 1996, known as HIPAA. This act says that if you have not received medical advice, diagnosis, care or treatment in the six months prior to enrollment in a plan, you can't be subject to the preexisting condition exclusion, according to the Department of Labor.
  
  Do your research and compare policies, as rates and acceptability guidelines will vary from company to company.
• Get another job. Consider getting a part-time gig where you can earn enough money to pay for your health benefits. Working just 20 hours a week at some companies will make you qualified for group health benefits.
• Good living. Regardless of the option you choose, live a healthy lifestyle. That's the best medical protection on the market.
  
  If you choose the option of going without health insurance before Medicare eligibility kicks in, think twice. You could face disastrous financial consequences should an illness or injury occur. Medical problems were behind nearly two-thirds of the personal bankruptcies in 2007, and that was before the economic downturn, reports the American Journal of Medicine.¹ So plan wisely.

For Military Only: Tricare OptionsRetired service members eligible for Tricare have three options before age 65:

• Tricare Prime: A health maintenance organization-type managed care program that provides annual coverage for $230 per individual and $460 per family. A primary care manager decides the most appropriate source of care — either a military treatment facility or a civilian network provider. No deductibles and minimal or no co-payment.
• Tricare Extra: A preferred provider organization-type program with a wider choice of Tricare network medical providers. No annual coverage or enrollment fee. There is an annual $150 per person, $300 family deductible and 20% to 25% cost shares based on Tricare-allowed expenses for everything from office visits to MRI services, after the deductible has been met.
• Tricare Standard: Pick from network or non-network providers, but you will pay more for that flexibility. This option requires an annual deductible of $150 per person, $300 family, plus 25% cost shares after the deductible has been reached.

To learn more, go to the TRICARE website.